Intel Cutting Retail Processor Supply for Holiday 2018

[trparky]

@Assimilator But I can't help but to say that Intel is shooting themselves in the foot. If the enthusiast crowd get screwed by Intel with the (over)pricing of their enthusiast lineup of processors what do you think that will do to their opinion about Intel when they walk into their places of work? Those prices are going to put a sour taste in their mouths. It may not necessarily make companies buy less Intel chips but it will certainly make them think about AMD for longer than one second.

 

[R0H1T]

Of course Intel makes more per CPU by putting a higher markup on each one. But they won't necessarily sell as many CPUs in total if the per-unit price is too high, because they'll get fewer buyers who can afford the higher price. So it's a balancing act between how much consumers are willing to pay vs how much Intel (or any company) can charge.

Those "lowly" Pentiums and Celerons make up the bulk of Intel's income (along with the server chips). Most systems built by OEMs are for secretaries and accountants and office workers who don't need high-core-count high-clocked processors, which means most of those systems use Pentiums and Celerons. And OEMs sell more systems, and therefore more CPUs, than every consumer retailer combined... probably a single OEM sells more than any retailer. OEM CPUs don't have as high a margin as retail, sure, but so many are sold that they still end up being many times more profitable than consumer sales.

Remember what I said before about contracts? OEMs have watertight contracts with Intel that specify that Intel will sell them X amount of CPUs at X amount of money and if Intel doesn't, Intel is in breach of the agreement. A breached agreement means Intel pays penalties to the OEMs... big monetary penalties. Really f'n big. The end result is that Intel literally cannot afford to not supply CPUs to its OEMs: it has to manufacture as many (probably more) low-end CPUs as it was before, but now it has less fab capacity. And - importantly - OEMs are essentially a guaranteed market for Intel; those contracts run for years, so if Intel breaks them, OEMs will go to AMD and stick with them. That's really bad news, maybe even worse than the financial implication.

D'you know the other type of chips that OEMs buy in massive volumes from Intel? Server chips. Again, Intel cannot cut production of those due to contractual agreements, and even if they could they wouldn't want to, because while comparatively few server chips are sold, the margins on those chips make the margins on retail look like a joke. (This is essentially the inverse of the low-end chips.)

What's the only segment that Intel can cut, to account for its diminished fab capacity, without kicking itself in the head too hard? That's right... consumer. The i7s and i9s, whether for mainstream or HEDT, are also the chips that make Intel the least amount of money. Cutting their production is going to be super painful for Intel's public image, but it's the "least bad" option in terms of what it means for the company's financials and relationship with OEMs.

I doubt that, seriously doubtful that part. Servers (Xeon) as a single set of chips are indeed the biggest money spinners, but after that it'd have to be notebooks AFAIK. I'm seeing less & less desktop usage even in corporate environments that's why I have question marks over that claim, unless of course we have real data that supports the theory.

OEMs also draw their contracts way ahead of time, anticipating such demand. Now again I'd like to clarify the distinction between notebook market, as a whole, vs desktop or servers chips wherein the number of (chip) orders can vary greatly & seasonally. So if the OEMs have anticipated more chip demand, in any of the segments, then Intel should've been able to do that as well. It's not like the OEM are writing a blank cheque or Intel's fulfilling an unspecified number of orders.

For instance moving the chipset production to 22nm or TSMC ~ so how about Intel stop making like a thousand of them for each gen?
Now are you gonna tell me that everything Intel's facing now was unavoidable ~ I say totally not!

 

[Deleted member 158293]

First intel cut allocation of CPUs to the professional server space, now to the consumer too.

This is what intel dropping to one knee to AMD looks like, now we know.

Feels like when the much bigger Massadonian army got ripped by a very small Greek army lead by a young Alexander...

 

[lexluthermiester]

Here's a thought; Instead of buying the retail versions of those CPU's, buy the OEM versions. It's not like anyone actually uses the stock coolers anyway.

 

[rtwjunkie]

But choosing not to prioritize retailers is.

Why would they? Retail CPU’s are not where the lion’s share of their income is.

 

[Vya Domus]

HD 5000 series was objectively better in every metric than the turd that was GTX 400 series, but then NVIDIA pulled a rabbit out of the hat and delivered GTX 500/Fermi v2 that fixed most of the major problems of the 400 series.

I am sorry but you are wrong on this, HD5000 predates Fermi. For about half a year Nvidia had nothing but the severely obsolete 200 series to which people still flocked to a degree. Not only AMD was better but it was also first yet their marketshare began dropping nonetheless around that 2009-2010 period. So no, a better product isn't enough. It certainly counts the most but it's not all.

And 500 series was just as much of a turd as the 400 series was, just polished a tad.

 

[Assimilator]

Here's a thought; Instead of buying the retail versions of those CPU's, buy the OEM versions. It's not like anyone actually uses the stock coolers anyway.

If you're happy to live with a 1-year instead of a 3-year warranty, yes. But if you think stock of retail CPUs is tight, then you're gonna be horrified at how few OEM CPUs are available for sale... because they're all going into OEM systems.

 

[Vya Domus]

Retail CPU’s are not where the lion’s share of their income is.

But it could be, hell I wouldn't be surprised if their sales in the consumer space easily rivaled what they achieved with servers. Just think of the plethora of laptops that have Intel chips exclusively .

 

[Assimilator]

I am sorry but you are wrong on this, HD5000 predates Fermi. For about half a year Nvidia had nothing but the severely obsolete 200 series to which people still flocked to a degree. Not only AMD was better but it was also first yet their marketshare began dropping nonetheless around that 2009-2010 period. So no, a better product isn't enough. It certainly counts the most but it's not all.

And 500 series was just as much of a turd as the 400 series was, just polished a tad.

I'm not wrong. HD 5000 was a big launch for AMD because they were uncontested in terms of performance for 6 months - that scared NVIDIA so badly that they released the unfinished Fermi, and we got the GTX 480, which was faster than the HD 5000 but a turd in all other respects.

But NVIDIA pulled it back by releasing the full Fermi a "mere" 6 months later, and the resultant GTX 580 was superior in all ways to 480, and still faster than HD 5000. That in turn caused AMD to misstep by rushing HD 6000, which released a month later yet couldn't overcome GTX 580. The end result was that the momentum AMD had picked up from HD 5000 was lost, and the enthusiast perception swung back in NVIDIA's favour.

 

[I No]

But it could be, hell I wouldn't be surprised if their sales in the consumer space easily rivaled what they achieved with servers. Just think of the plethora of laptops that have Intel chips exclusively .

That's never going to happen.... The server market is way more robust and predictable rather than the consumer market, why? because of contracts. If one such contract is signed you have way more guarantee that the money will be delivered on a timely manner. On the opposite you have the customer who may buy or not buy the product. Not to mention the volume of said sales. If the consumer market was that easy to make money out of AMD, nVidia or Intel for that matter won't bother with the other segments.

Edit: Oh and the laptops fall into the OEM market bracket which is still above retail when it comes to who gets what first.

 

[lexluthermiester]

If you're happy to live with a 1-year instead of a 3-year warranty, yes.

But how often does the warranty ever get used? I've been building PC's for more than 30 years and have only once had to claim warranty with Intel. So is it that big a deal?

 

[I No]

But how often does the warranty ever get used? I've been building PC's for more than 30 years and have only once had to claim warranty with Intel. So is it that big a deal?

It's mostly the "better safe than sorry" principle, besides the the price difference isn't that high.The availability of OEM like Assimilator mentioned is meh, if you check Amazon the price for OEMs is actually higher than the retail ones.

 

[lexluthermiester]

if you check Amazon the price

Amazon? Shopping for PC parts on Amazon is not the greatest place to look.

 

[I No]

Amazon? Shopping for PC parts on Amazon is not the greatest place to look.

I know , even newegg's offers are the same, you could find a place that sells OEM SKUs for peanuts just requires a bit of digging. Most people give up on that half way through.

 

[lexluthermiester]

I know , even newegg's offers are the same, you could find a place that sells OEM SKUs for peanuts just requires a bit of digging. Most people give up on that half way through.

That's not to say it's a bad place, because there are some great deals to be had on Amazon, such as HDD/SSD and other storage options and even cases. CPU's and GPU's not so much though. I find Ebay and Newegg better places generally for those items.

 

[ArbitraryAffection]

Aaaand still the Dumb Dumbs will buy those $900 9900K's, lol.

 

[eidairaman1]

A Ryzen CPU and a GTX 1080 would be the parts I would buy right now to build a gaming PC.

Ryzen and 1070Ti,1080,1080ti 580 ,56 ,64

Here's a thought; Instead of buying the retail versions of those CPU's, buy the OEM versions. It's not like anyone actually uses the stock coolers anyway.

There are plenty that do especially to be within their budget.

Amazon? Shopping for PC parts on Amazon is not the greatest place to look.

There are times I found parts for better pricing than at Newegg, directron etc.

 

[Venger]

Wow Intel...

 

[Andrew LB]

Ultimately they're just cutting their own throats by alienating the retail customer, Once Zen 2 lands and has IPC (and hopefully the clock speeds) to match Intel's best, the only remaining reason to choose an Intel CPU over an AMD one, goes out the window.

Intel could easily lose another 10-15% of CPU market share over the next two years because of their self entitled arrogance.

...If only we could see the same happen to Nvidia in the GPU market.

What are you talking about? Intel could easily lose another 10-15% cpu market share? AMD's market share is only about 15%. The biggest gain AMD has had in any CPU market segment is in datacenter servers where their more than doubled their market share (deceptive as hell), going from 0.5% to about 1.5%.

 

[TheGuruStud]

Can't have AMD stealing retail sales. That looks bad. No doubt they'd rather sell to etailers for juicy margins, but I guess they don't want to risk share fallout when stats come out.

I'm not wrong. HD 5000 was a big launch for AMD because they were uncontested in terms of performance for 6 months - that scared NVIDIA so badly that they released the unfinished Fermi, and we got the GTX 480, which was faster than the HD 5000 but a turd in all other respects.

But NVIDIA pulled it back by releasing the full Fermi a "mere" 6 months later, and the resultant GTX 580 was superior in all ways to 480, and still faster than HD 5000. That in turn caused AMD to misstep by rushing HD 6000, which released a month later yet couldn't overcome GTX 580. The end result was that the momentum AMD had picked up from HD 5000 was lost, and the enthusiast perception swung back in NVIDIA's favour.

They didn't fool me. I had two 6950s flashed to 70s and stomped all over nvidia. And I did it, again, with 7950 beating the 680 for 150 less lol. It wasn't even a contest except the clueless were still buying nvidia garbage.

 

[Assimilator]

But how often does the warranty ever get used? I've been building PC's for more than 30 years and have only once had to claim warranty with Intel. So is it that big a deal?

I imagine it wouldn't be an issue for most people on this forum, especially for something like a CPU that generally either works from day one or doesn't at all. But most people aren't hardware enthusiasts and they're willing to shell out a bit extra for some additional peace of mind; that's the whole reason extended warranties exist.

 

[lexluthermiester]

But most people aren't hardware enthusiasts and they're willing to shell out a bit extra for some additional peace of mind; that's the whole reason extended warranties exist.

That's a fair point.

 

[stimpy88]

That's because they can ask for even higher prices in OEM, enterprise space where the demand is pretty high & margins higher, than retail. It's like they're triple dipping

Right now they are practically paying the larger OEMs (the ones that buy the most CPUs) to have their processors. Bribing is the only reason Intel will still be in the datacenter by the end of 2019.

 

[lexluthermiester]

Bribing is the only reason Intel will still be in the datacenter by the end of 2019.

Rubbish. Bribes are highly illegal in most of the civilized nations of the world and the US government would come down hard on Intel if they found out they were doing it all with nations that do allow it. And while AMD's CPU's are giving Intel a damn good run, they are not dominant yet.

 

[I No]

Right now they are practically paying the larger OEMs (the ones that buy the most CPUs) to have their processors. Bribing is the only reason Intel will still be in the datacenter by the end of 2019.

That's BS, AMD handed the datacenters over to intel for FREE during the lifespan of the Bulldozer arch, not to mention the mobile business, the only reason why intel has their hands on those segments is AMD's blunder. The bribe accusation was settled and AMD got a bucket of money, that was back with Athlon 64. Intel played dirty indeed but the failure was AMD's afterwards.